The countdown has begun for the construction industry to learn the steps to the new dispute resolution regime called "adjudication". Effective October 1, 2019, construction industry stakeholders may trigger the adjudication process to resolve disputes essentially at any given time during the project, provided certain conditions are met.
The Construction Act sets out rules that govern the process and procedure for holding an adjudication. A party to a contract may refer a dispute with another party to that contract to adjudication with respect to:
- The valuation of services or materials;
- Payment under the contract;
- Disputes that are the subject of a notice of non-payment;
- Set-off claims;
- Payment and non-payment of holdback;
- Any other matter that the parties agree to adjudicate; and
- A dispute with the principal and surety in relation to payment guaranteed under a labour and material payment bond.
Only one matter may be addressed in an adjudication, unless the parties and the adjudicator agree otherwise.
The steps to adjudication are simple, even for parties with two left feet.
An adjudication commences when one party sends a written notice of adjudication to a second party. The notice must include the names and addresses of the parties, a description of the dispute and the nature of the relief sought. A copy of the notice of adjudication must be sent to the Authorized Nominating Authority ("ANA"), the governing entity that regulates adjudicators. The recipient of the notice of adjudication may respond in writing.
It should be noted that parties may formulate their own adjudication procedure in their contract, as long as that procedure complies with the Construction Act. The parties cannot agree to contract out of adjudication. As well, a party may still lien a project while engaging in adjudication.
The parties may agree upon an adjudicator from the registry of pre-approved adjudicators maintained by the ANA, otherwise an adjudicator will be appointed by the ANA. The parties cannot pre-select their adjudicator in their contract.
Once the adjudicator agrees to act, the party that served the notice of adjudication has 5 calendar days to provide to the adjudicator the documents that it intends to rely upon. The adjudicator may issue directions regarding the production of documents.
The adjudicator has to work quickly on his or her feet, as he or she must make a decision within 30 days of receiving the documents of the party referring the matter to adjudication. Unless the parties agree to an extension, decisions rendered after that 30day deadline are of no force and effect.
A decision made by an adjudicator is enforceable in the same manner as a court order. Subject to the parties revisiting the decision through court or other proceedings, the decision is binding on the parties.
The Construction Act requires that payment be made from one party to another pursuant to an adjudicator's award no later than 10 days after the decision is communicated to the parties and imposes mandatory, non-waivable interest on all late payments. Where an award is not paid by a party, the other party may suspend further work under the contract until the award, interest and any reasonable costs incurred by that party as a result of the suspension of work are paid. Parties cannot suspend work while the adjudication is ongoing
Powers of Adjudicators
Adjudicators have fairly broad powers under the Construction Act. They have the power to ascertain relevant facts and the law, draw inferences based on the conduct of the parties and make a determination in the adjudication. In addition, an adjudicator may conduct onsite inspections and retain an expert to determine any matter of fact.
Authorized Nominating Authority (ANA)
On July 18, 2019, ADR Chambers was appointed by the Attorney General to serve as the ANA. The ANA will develop and oversee programs for training adjudicators, qualify candidates as adjudicators, maintain a registry of adjudicators and appoint adjudicators. The government has released fairly detailed regulations on the governance, composition and mandate of the ANA.
Based on the foregoing, the concept of adjudication appears deceptively simple. However, the short timelines for parties to comply with the abovementioned steps mean that parties will have to be fast on their feet to organize their cases. The construction industry should prepare itself in the coming months to avoid tripping over its feet when adjudication comes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.